Final Rules on Swap Data Reporting and Recordkeeping Requirements under Dodd-Frank Issued by CFTC | Practical Law

Final Rules on Swap Data Reporting and Recordkeeping Requirements under Dodd-Frank Issued by CFTC | Practical Law

The CFTC adopted final rules on swap data reporting and recordkeeping requirements for registered entities and parties to all non-security-based swaps.

Final Rules on Swap Data Reporting and Recordkeeping Requirements under Dodd-Frank Issued by CFTC

by PLC Finance
Published on 21 Dec 2011 • USA (National/Federal)
The CFTC adopted final rules on swap data reporting and recordkeeping requirements for registered entities and parties to all non-security-based swaps.
On December 20, 2011, the CFTC adopted final rules on swap data reporting and recordkeeping requirements for registered entities and parties to all non-security-based swaps. Data must generally be retained by the parties to a swap for five years. The rules apply to the following registered entities: swap data repositories (SDRs), derivatives clearing organizations (DCOs), designated contract markets (DCMs), swap execution facilities (SEFs), swap dealers and major swap participants (MSPs). The rules also impose reporting and recordkeeping obligations on swap counterparties that are neither swap dealers nor MSPs (including end users that are otherwise exempt from Dodd-Frank swaps regulations). The rules apply to all swaps entered into after the applicable compliance dates specified in the final rules.

Swap Data Reporting Requirements

To ensure that complete data on swaps is available to regulators, the final rules call for electronic reporting to a registered SDR of non-security-based swap data:
  • Upon the creation of the swap. Such data is referred to in the rules as creation data. Creation data consists of all terms of a swap agreed upon by the counterparties upon confirmation of the swap. Parties may satisfy the reporting requirement for swap creation data under the rules by executing the swap on or pursuant to the rules of a registered SEF or DCM. Parties to swaps not executed on a registered SEF or DCM must report swap creation data themselves.
    Creation data for cleared swaps must be reported by DCOs. In some instances, the DCM/SEF and the DCO will report the same creation data.
  • During the life of the swap until its final termination or expiration. Such data is referred to in the rules as continuation data. Continuation data for cleared swaps is reported by DCOs. Continuation data for uncleared swaps must be reported by the parties to the swap.
For a helpful flowchart detailing the parties that must report swap data in specific instances, see pages 2156 and 2157 of the final rules.
Where the parties to a swap are responsible for data reporting:
  • If one of the parties to the swap is a SD or MSP, the SD/MSP is responsible for fulfilling the parties' reporting obligations under the rules.
  • If one of the parties to the swap is a SD and the other is a MSP, the SD is responsible for fulfilling the parties' reporting obligations under the rules.
  • If neither of the parties to the swap is a SD or MSP, but one party is a "financial entity" as defined under the Commodity Exchange Act (CEA), the financial entity is responsible for fulfilling the parties' reporting obligations under the rules.
  • If both parties are SDs, both parties are MSPs or both parties are non-SD/MSP counterparties, then the parties must designate among themselves which of them will be the reporting party unless only one of the parties is a U.S. person, in which case the U.S. person is to be the reporting party.

Swap Data Recordkeeping Requirements

Under the final rules, records of all data required to be reported to SDRs in connection with a swap that is a non-security-based swap under Title VII of Dodd-Frank must be retained through the term of the swap and for five years following its termination or expiration by:
  • All parties to the swap.
  • All SEFs, DCMs and DCOs involved in the clearing or exchange trading of the swap.
SDRs must keep records throughout the existence of the swap and for 15 years following its termination or expiration.
This data includes (but is not limited to):
  • The primary economic terms of the swap verified or matched by the counterparties at or shortly after the time of execution.
  • All of the terms of the swap included in the legal creation of the swap.

Compliance Schedule

The final rules establish three staggered compliance dates based on type of swap and type of entity, the first of which will begin no earlier than July 16, 2012:
  • SEFs, DCMs, DCOs, SDRs, SDs and MSPs must comply with the final swap data reporting and recordkeeping rules for their credit and interest rate swaps by the later of July 16, 2012 or 60 days following the publication of final Dodd-Frank rules on the definitions of "swap," "swap dealer" and "major swap participant" in the Federal Register.
  • The above entities must begin to comply with the final rules for their equity swaps, foreign exchange swaps and other commodity swaps 90 days after the first compliance date.
  • Swap counterparties that are not SDs or MSPs must begin compliance with respect to all types of swaps 90 days after the second compliance date.

Related Swap Data Reporting Rules under Dodd-Frank

The final rules were approved by the CFTC in conjunction with new rules regarding the real-time public reporting of swap transaction data (see Legal Update, Final Rules on Real-time Public Reporting of Swap Transaction and Pricing Data under Dodd-Frank Issued by CFTC). In many instances, it is unclear how the rules are meant to work together, which could lead to confusion among market participants. However, both rules have the same initial compliance dates, and the CFTC is working to align timeframes and costs for both rules in order to permit a reporting entity or counterparty to fulfill both obligations by filing a single report, should the reporting entity or counterparty choose to do so.
These rules are designed to complement, but do not supersede, earlier proposed rules on swap data reporting and recordkeeping requirements for SDs and MSPs (see Legal Update, CFTC Proposes Rule on Requirements for Swap Reporting, Recordkeeping and Daily Trading Records of Swaps Dealers and Major Swap Participants), which has yet to be finalized. There will likely be some overlap between the two sets of rules.
Separate final rules will also be forthcoming on swap data reporting and recordkeeping for "transition" and "pre-enactment" swaps (see Legal Update, CFTC Proposes Pre-enactment and Transition Swap Recordkeeping and Reporting Rules under Dodd-Frank). Pre-enactment swaps are swaps entered into before the enactment date of Dodd-Frank (July 21, 2010). Transition swaps are swaps entered into on or after the enactment date but before Dodd-Frank swap data reporting and recordkeeping rules become effective.
For further information on these final swap data reporting and recordkeeping rules, see the CFTC's fact sheet and Q&A.
For more information on the regulation of swaps and derivatives under the Dodd-Frank Act, see Practice Note, Summary of the Dodd-Frank Act: Swaps and Derivatives.